Prices Cut Into Household Incomes

Rising prices took a toll on Americans’ incomes as the year began, halting a four-month streak of gains and renewing concerns about the consumer’s resilience amid higher gas prices.

That’s according to a report Tuesday that found real median annual household income in the U.S. declined by 1.3% in January from December, to $50,020 from $50,673.

The tick downward follows monthly increases in income from September through the end of 2011, according to the analysis of Census Bureau data conducted by Sentier Research, an Annapolis, Md., firm run by two former Census officials.

Sentier’s Gordon Green, who wrote the report with John Coder, said there are three factors behind the downshift to consider:

First, median U.S. household income, both nominal and real, declined in January from December.

Second, the drop in inflation-adjusted income fell as the Consumer Price Index climbed; the late-2011 runup in income was accompanied by a decline in the CPI, hitting the consumer with what Mr. Green described as a “double whammy,” of falling nominal income and rising prices.

Third, while the unemployment rate has eased — to 8.3% in January from 9.0% in September — the duration of long-term unemployment hasn’t, nor has the unemployment measure that includes those who are working part-time but seeking full-time work. That means, Mr. Green said, that although ostensibly the employment situation appears to be improving rapidly, beneath the headline unemployment number, the reality is “no great shakes.”